Dear Reader,
Four U.S. banks have failed this year – Silvergate, Silicon Valley Bank, Signature Bank, and First Republic. Combined, the failed banks held more than $548 billion in total assets. Already, 2023 has seen the most destructive collapse – in dollar terms – for the banking sector.
The Federal Reserve says there’s a 68% chance of a recession this year.
And interest rates are at a 15-year high.
But despite the gloom, tech stocks are up.
The Nasdaq has rallied 28% this year.
Standout companies Nvidia, Meta, and Alphabet are up 166%, 124%, and 40%.
That’s confusing to most people. The “common” knowledge on Wall Street is that tech stocks are high growth… so they’re supposed to be hit harder when the economy is in a downturn.
But there’s a big breakthrough in tech that’s helping to boost share prices.
The good news is that growth won’t be isolated to a handful of big names. This technology will see mass adoption – offering the chance for broad economic growth.
Let me explain…
Asking the Right Question
In 1999, nearly every business leader was asking their colleagues one question, “Should we have a website?”
The answer seems obvious now. Of course they should.
But the internet was still new in 1999. And companies weren’t totally sure how the internet could benefit them.
We take it for granted that a website extends a company’s reach to a wider audience… allows direct-to-consumer sales and communications… and helps corporate branding.
In 2007, we saw corporations face the same question. This time it was about social media. Today, nearly every major corporation uses platforms like Facebook, Twitter, and TikTok to engage its users.
Last year, U.S. companies spent $271 billion on digital ads. Nearly a fourth of that was spent on social media sites.
Today, we’re seeing a new tech breakthrough that will lead to the same mass adoption as websites and social media.
Over the next two years, every company will ask themselves the same thing – “Should we adopt AI?”
AI Revolution
By now, readers of The Bleeding Edge will be aware of generative artificial intelligence (AI). It may feel like AI popped up overnight. ChatGPT was the first mainstream AI program to grab the world’s attention when it was released in November 2022.
But researchers have been tinkering with it for over 70 years.
One of the earliest forms of AI was a program built in 1952 that learned how to play checkers.
Since then, it’s been used in speech transcription software, to guide Mars rovers, and to assist highway driving.
But those were all one-off use cases. The AI had to be built to solve a specific problem. Today’s AI is different.
For the first time, AI programs can be trained on datasets for a variety of roles.
The most popular AI right now is ChatGPT. Even the free version can compose songs, answer questions, and write code to build websites and apps.
Specialized versions can be used as customer service agents, to write marketing material, and even provide live analysis on stocks and bonds.
This flexibility means that AI is accessible to nearly every business.
Just like in 1999 and 2007, we’re going to see companies rapidly adopt new tech.
It’ll make them more efficient… and more responsive to their customers.
The CEO of IBM stated in a recent interview with Bloomberg that he foresees AI replacing 30% of office jobs over the next five years.
We estimate that to be about $780 million in yearly savings.
That would boost IBM’s 2022 net income of $1.6 billion by 48% to $2.4 billion.
That’s a huge incentive to adopt AI. And it’s the reason I’ve identified the three best opportunities to profit.
Beyond Big Tech
This boom in AI is why I’m looking beyond just a few big tech giants. Thousands of companies will soon start racing to adopt AI.
I see three main types of companies that will benefit – innovators, integrators, and adopters.
Innovators are the companies making big breakthroughs in hardware and AI programming.
Nvidia is an innovator that made a breakthrough with its hardware. Analysts are forecasting a 58% growth in sales this year thanks to its innovations in hardware.
Integrators are companies that help others adopt AI. While anyone can pay a flat fee to access basic AI, companies will need more help to make sure the AI is thoroughly vetted before it goes live.
A giant accounting or law firm can’t risk using an AI that makes mistakes. They’ll need an integrator that can test and verify that the AI works.
Next are the adopters. This is the largest part of the market. Nearly every company will adopt AI over the next few years. We can get an edge here by finding the earliest adopters.
If you’re worried that you’ve missed the chance to profit from AI stocks, don’t be.
This is a transformational technology that will touch nearly every company’s bottom line.
That’s why I’m dedicating nearly all my time to investigating the best opportunities to profit from AI. And every week, I’ll be sharing my findings with you.
Regards,
Colin Tedards
Editor, The Bleeding Edge